Stochastic Oscillator

The Stochastic Oscillator measures the speed or momentum of price movements. It is used to identify bullish and bearish reversals. And since it is range bound it can also identify oversold and overbought levels.

The Stochastic Oscillator consists of:

  • %K Line (Blue Line)
  • %D Line (Red Line)

The 2 types of Stochastic Oscillators are:

  • Fast Stochastic (FSTO)
  • Slow Stochastic (SSTO)

 

Ways to Interpret the Stochastic Oscillator

Interpretation of the Stochastic Oscillator
Buy When the %K Line (Blue Line) crosses the %D Line (Red Line) upwards.
Buy When both the %K Line (Blue Line) and the %D Line (Red Line) are below 20.
Sell When the %K Line (Blue Line) crosses the %D Line (Red Line) downwards.
Sell When both the %K Line (Blue Line) and the %D Line (Red Line) are above 80.

 

Look for the Following Instances

Identify the Following Shapes
Identify a Bottom Forming When the Slow Stochastic Oscillator (SSTO) forms a basin.
Identify a Top Forming When the Slow Stochastic Oscillator (SSTO) forms an umbrella.

 

Look for the Following Divergences

Divergences
Identify a Bottom Forming When the price of the stock goes lower but the Stochastic Oscillator goes higher.
Identify a Top Forming When the price of the stock goes higher but the Stochastic Oscillator goes lower.

 

Example 1

Stochastic Oscillator 1
Source: Thinkorswim by TDAmeritrade

 

Example 2

Stochastic Oscillator 2
Source: Thinkorswim by TDAmeritrade

 

Example 3

SSTO
Source: Thinkorswim by TDAmeritrade by TDAmeritrade

 

Example 4

FSTO
Source: Thinkorswim by TDAmeritrade

 

My Financial Analysis of Stocks

  • Another Dead Cat Bounce, We Haven't Bottomed Yet, Goldman Predicts S&P 2000 The Dow Jones has rallied to 22,327 over the past several days. However, we believe this is another dead cat bounce. We sold all our shares of United Health ...
    Posted Mar 30, 2020, 8:35 PM by Intelligent Investor
  • Coronavirus Is The Black Swan Event That Ended The Bull Market In 2020 A Black Swan Event is an unpredictable event that causes catastrophic damage to an economy. A few days ago, we wrote an article describing the coronavirus as a Black Swan ...
    Posted Mar 18, 2020, 9:21 AM by Intelligent Investor
  • Beyond Meat (BYND) and Dunkin (DNKN), The End Of A Tale Of 2 Speculative Stocks During a recession speculative stocks get pounded down to the ground. Thus, we sold all of our shares of Beyond Meat (BYND) and Dunkin' Donuts (DNKN). Beyond Meat is in ...
    Posted Mar 18, 2020, 9:22 AM by Intelligent Investor
  • The Dow Jones Rallies 1294 Points, Sold More Stocks On This Dead Cat Bounce The Dow Jones jumps 1294 points a few days ago, however, we believe that this rally is a "dead cat bounce". We have to wait for the next quarter's ...
    Posted Mar 16, 2020, 9:56 PM by Intelligent Investor
  • We Panic Sold Today was a really bad day in the market. The Dow Jones opened at negative 1000 points. It seems as if the coronavirus is gaining steam and is about to ...
    Posted Mar 18, 2020, 9:23 AM by Intelligent Investor
  • I'm Calling Tops, It's Over, The Bull Market Is Over, Here Comes The Bear Market, A Recession Is Coming We weren't sure yesterday that the bull market is over. In the morning today, the Dow Jones was up about 300 points, and I thought we were just having ...
    Posted Mar 1, 2020, 10:47 AM by Intelligent Investor
  • Went On A Selling Spree Today I think this stock market bull run is over. I just have a hunch that it's over. However, I've been wrong before. The deadly coronavirus outbreak seems to ...
    Posted Feb 24, 2020, 10:41 PM by Intelligent Investor
  • Sold Apple (AAPL) At What Looks Like A Peak Apple (AAPL) looks like it may have peaked at $325/share. News came out during the past couple of days that Apples largest factory in China that makes iPhones is ...
    Posted Mar 18, 2020, 9:26 AM by Intelligent Investor
  • Beyond Meat (BYND) and Dunkin (DNKN), A Tale Of 2 Speculative Stocks Last year, we bought Dunkin' Donuts (DNKN) and Beyond Meat (BYND). We couldn't find any bargains, so we invested a small amount in these 2 speculative stocks.I've ...
    Posted Mar 18, 2020, 9:27 AM by Intelligent Investor
  • Stocks That We Bought and Sold for the Past Year to Date Sold John Deere (DE), it is a cyclical business and the trade war the U.S. has with China isn't making things any better. Berkshire Hathaway also sold their ...
    Posted Jul 27, 2019, 12:04 PM by Intelligent Investor
Showing posts 1 - 10 of 46. View more »